From a JP Morgan client note, some snippets on currencies
- JPM look for the trade-weighted USD to 'maintain recent range'
Say to 'Stay long JPY' on
trade tensions … In line with its tendency to fall in July and rise in August, volatility in some markets has begun moving higher on a combination of this week's policy threats and actions.
The policy threat
- is the Trump Administration's proposal to increase potential tariffs on $200bn of Chinese imports from 10% to 25%, a decision on which should come by late August/early September
- Trade war remains the more worthy wildcard, because the Trump Administration seems willing to press its perceived advantage over China as long as the US economy, S&P500 and Presidential approval rating remain resilient
policy action
- the BoJ's decision to allow greater volatility in 10Y JGB yields as it furthers a QE tapering that began about 18-months ago as part of the Bank's operational turn from targeting the quantity of money to targeting its price
(bolding mine)